Correlation Between Nordic Technology and Goodtech

Can any of the company-specific risk be diversified away by investing in both Nordic Technology and Goodtech at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nordic Technology and Goodtech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nordic Technology Group and Goodtech, you can compare the effects of market volatilities on Nordic Technology and Goodtech and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nordic Technology with a short position of Goodtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic Technology and Goodtech.

Diversification Opportunities for Nordic Technology and Goodtech

0.36

Correlation Coefficient

Nordic Technology  Goodtech

Weak diversification

The 3 months correlation between Nordic and Goodtech is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Technology Group and Goodtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodtech and Nordic Technology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nordic Technology Group are associated (or correlated) with Goodtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodtech has no effect on the direction of Nordic Technology i.e., Nordic Technology and Goodtech go up and down completely randomly.

Pair Corralation between Nordic Technology and Goodtech

Assuming the 90 days trading horizon Nordic Technology Group is expected to generate 9.35 times more return on investment than Goodtech. However, Nordic Technology is 9.35 times more volatile than Goodtech. It trades about 0.04 of its potential returns per unit of risk. Goodtech is currently generating about -0.11 per unit of risk. If you would invest  190.00  in Nordic Technology Group on December 28, 2024 and sell it today you would lose (22.00) from holding Nordic Technology Group or give up 11.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nordic Technology Group  vs.  Goodtech

Nordic Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Technology Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Nordic Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

Goodtech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goodtech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Nordic Technology and Goodtech

The main advantage of trading using opposite Nordic Technology and Goodtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordic Technology position performs unexpectedly, Goodtech can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Goodtech will offset losses from the drop in Goodtech's long position.

The idea behind Nordic Technology Group and Goodtech pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.